Air China set to fly high, chief says

08:37, October 28, 2009      

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He is the son of a legendary revolutionary couple who were in the thick of the action when New China was founded 60 years ago. Kong Dong is a man with his eyes on the horizon as he steers the country's flag-carrier, Air China, toward high-altitude profitability after the turbulence witnessed due to the global economic slowdown.

Kong, 61, told China Daily yesterday: "I have full confidence that we can turn over an exam paper with quite satisfactory scores to our stakeholders, thanks to China's economic resurgence and air traffic rebound."

If that happens, it would be a decisive victory for Kong, whose company, with a workforce of 20,000, plunged deep into the red in 2008, registering a loss of 9.2 billion yuan. It was a poor year after five years of positive growth ever since the company was listed in 2004.

But the Air China chairman knows that a little turbulence during a long flight is to be expected and that the company is well on course.

Of last year's losses, those from fuel hedging stood at 7.5 billion yuan, and a further 1.18 billion yuan was due to investment losses.

"This meant our core businesses - passenger and cargo - were still on a solid footing despite the global economic crisis," Kong said, adding that the setback served as an important reminder to boost corporate confidence and morale.

Some analysts believe Air China is set to become one of the most profitable airlines in the world this year, with major carriers including Lufthansa, Singapore Airlines, All Nippon Airways and almost all carriers in the United States, suffering from losses due to the economic recession.

"But this doesn't mean anything and offers no reason for us to be complacent - they are experiencing more difficulties than we are; and in reality, we are lagging the world's top carriers," said Kong.

As if to match the country's pace in recovering from the global economic slump, Air China posted a net profit of 2.88 billion yuan for the first half of the year. A year ago, it was just 1.13 billion yuan.

Core business operations and fuel hedging gains contributed equally to the higher income, Kong said.

This was in stark contrast to most of the leading international carriers, which have not yet emerged from a drop in business resulting from the economic slump.

Kong said his company's performance was in part attributable to its stringent efforts to narrow down capital expenditure, improve aircraft use efficiency, and economize on fuel use by taking steps such as shortening the distance planes take to taxi along the runway.

China reported year-on-year gross domestic product growth in the third quarter of 8.9 percent. National Bureau of Statistics' spokesman Li Xiaochao said on Oct 22 that the country would achieve its goal of 8 percent GDP growth for the whole year.

The number of air travelers increased by 20 percent from a year earlier to reach 151 million in the first eight months, according to the bureau's statistics.

"Our business in October was good, and November will see surging turnover as international travelers prepare for Christmas. As for December, a traditionally lean month, we've chalked up countermeasures in advance," said Kong.

"So, this is certainly going to be a better-than-expected year to celebrate."

A graduate of mechanical engineering, Kong has decades-long experience in the aviation utility sector. When he took over as chairman of Air China last April, the technocrat turned heads by doing things differently from the aviation industry practice - answering letters of complaint, learning risk-management and preaching best practices.

Through its quality service and being the exclusive carrier to Chinese leaders on their overseas trips, Air China has become a reliable brand for millions of travelers. But Kong said: "If Air China wants to further differentiate itself from others, it needs to improve service quality."

That explains why Cathay Pacific Airways Ltd, Air China's Hong Kong partner, is high on Kong's mind.

"Cathay Pacific is a model for Air China to learn from," Kong said. "We have started an exchange program (with Cathay) to train our employees in a variety of aspects, including service, marketing, finance and personnel management."

Realizing Air China's disparity with the world's major air powers, the company has set a goal of developing Air China as one of the global top 10 air businesses in terms of comprehensive strength by the year of 2015, said Kong.

Air China hopes it will be flying high based on its global aviation hub in Beijing, supplemented by its presence in other key cities, company sources said.

It opened a subsidiary in Shanghai earlier this year to strengthen its foothold in the international air traffic center, and launched a Hubei subsidiary this May.

Source:China Daily
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